β Beta Stock Calculator
Calculate a stock's beta coefficient to measure its volatility relative to the market.
Beta Interpretation
| Beta | Meaning |
|---|---|
| <0 | Moves opposite to market |
| 0–1 | Less volatile than market |
| 1 | Moves with market |
| >1 | More volatile than market |
Beta = Cov(stock, market) / Var(market). A beta of 1.5 means the stock is expected to rise/fall 1.5% for every 1% market move.
What Beta Tells You About a Stock
Beta measures a stock's volatility relative to the overall market (typically the S&P 500). A beta of 1.0 means the stock moves in line with the market. Beta of 1.5 means it moves 50% more than the market — up or down. Beta of 0.5 means it moves half as much. Negative beta (rare) means it moves opposite to the market — gold stocks and some utilities occasionally show this.
Beta in the CAPM Formula
CAPM: Expected Return = Risk-Free Rate + Beta × (Market Return − Risk-Free Rate). A stock with beta 1.5 and a 5% risk-free rate in a market returning 10% should return 5% + 1.5 × 5% = 12.5%. Investors demand higher returns for higher-beta stocks because they take on more systematic risk that cannot be diversified away.
People Also Ask
Neither — it depends on your goal. High beta (1.5+) stocks amplify market gains in bull markets but amplify losses in bear markets. Low beta stocks (under 0.5) provide stability but lag in rallies. Aggressive growth investors seek high beta; income and preservation investors prefer low beta.
Unlevered beta removes the effect of financial leverage to measure pure business risk. Formula: Unlevered Beta = Levered Beta ÷ [1 + (1−Tax Rate) × (Debt/Equity)]. Used in WACC analysis when comparing companies with different capital structures.
Beta = Covariance(Stock Returns, Market Returns) ÷ Variance(Market Returns). In practice, this is usually calculated using 36–60 months of monthly returns via regression. The slope of the regression line of stock returns vs market returns is the stock's beta.